Does Galveston Offer a Model For Social Security Reform?
Some, including President Bush, have pointed to the experience of Galveston, Texas as demonstrating why private accounts should be incorporated into Social Security. In 1981, Galveston and two other Texas counties opted out of Social Security and established their own substitute Social Security systems for county employees.[1] Their plans provide retirement, survivors, and disability benefits. These plans, however, do not provide evidence that the President’s approach could be successful, for three basic reasons. • The Galveston Plan bears little resemblance to the President’s plan. The Galveston plan does not have voluntary private accounts. Instead, the county invests pension funds in the market; individual workers do not have accounts or any control over investment decisions. In addition, participation in the Galveston plan is mandatory. The Galveston Plan also features higher payroll tax contributions: 13.9 percent of payroll, as compared to 12.4 percent under the traditional Socia
